Jabre eyes 'bombed out' stocks
LONDON (Reuters) - Many stocks in heavily discounted sectors such as banks and industrials still look cheap, says hedge fund manager Philippe Jabre, although he has trimmed his large weighting in equities after the recent rally.
The former GLG (GLG.N) manager, whose Geneva-based Jabre Capital Partners runs around $3 billion (1.8 billion pounds) in assets, said stocks whose share prices were battered last year can benefit from easier access to credit, less competition and improving margins.
"There's money to be made in sectors that were the weakest," he said in an interview on Wednesday.
"You have a lot of stocks that are cheap in this market, hit by deleveraging of investment funds.
"Industrials are very bombed out. Six months ago everyone as scared about bankruptcy. Ford (F.N) was $2, now it's $6, but why should it stop at $6 if it's making money and competitors are bankrupt?"
Jabre was fined a record 750,000 pounds in 2006 by Britain's Financial Services Authority for market abuse after building a reputation as one of the City's top hedge fund managers. He later set up his own firm in Switzerland.
Jabre, who says the recovery is a "slowly improving environment" rather than a bull market, is positive on the effect of government stimulus packages and highlights stronger credit markets as a key reason for boosting equities.
"The credit world is better than at the end of December," he said. "Companies can borrow money cheaper ... This makes stocks more desirable.
"You've had massive refinancing of the market -- $200-$300 billion of recapitalisation," he added. "The market has absorbed it very well, which is a good sign."
Jabre also believes market gains could continue as investors on the sidelines who did not participate in the recent rebound in markets buy into further rises on fears of missing out again.
"The market is flat over six months so people with nothing in equities didn't miss out, but if the market goes up 10 percent from now there's more chance (they'll invest in the market)."
CUTTING BACK
However, Jabre has trimmed back his equity position, which had risen as high as 95 percent in his long-only fund earlier this year, although at 70 percent it was still overweight compared to the fund's benchmark.
One stock he favours is Barclays (BARC.L), whose recovery from below 50 pence in January to nearly 300 pence currently has boosted his performance as well as that of Odey.
"A lot of signals show there's very strong earnings growth to come. They're very actively hiring, borrowing costs are low, they're doing well out of the acquisition of Lehman Brothers (New York)," he said. Continued...
